Cooper Hosp. Univ. Med. Ctr. v. Selective Ins. Co. of Am.

Decision Date22 December 2021
Docket Number085211,A-46 September Term 2020
Citation249 N.J. 174,265 A.3d 70
Parties COOPER HOSPITAL UNIVERSITY MEDICAL CENTER on assignment by Dale Mecouch, Plaintiff-Appellant, v. SELECTIVE INSURANCE COMPANY OF AMERICA, Defendant-Respondent.
CourtNew Jersey Supreme Court

Stanley G. Wojculewski argued the cause for appellant (Costello Law Firm, attorneys; Stanley G. Wojculewski, on the brief).

Laura A. Brady argued the cause for respondent (Coughlin Midlige & Garland, attorneys; Laura A. Brady, of counsel and on the brief, Morristown, NJ, and Christa P. McLeod, Florham Park, NJ, on the brief).

Robert B. Hille argued the cause for amicus curiae New Jersey Hospital Association (Greenbaum, Rowe, Smith & Davis, attorneys; Robert B. Hille, Roseland, NJ, of counsel and on the brief, and John W. Kaveneyand Neil Sullivan, Roseland, NJ, on the brief).

Susan Stryker argued the cause for amicus curiae Insurance Council of New Jersey (Bressler, Amery & Ross, attorneys; Susan Stryker, Florham Park, NJ, of counsel and on the brief).

JUSTICE ALBIN delivered the opinion of the Court.

In 2016, Dale Mecouch was hospitalized for approximately two months at Cooper Hospital University Medical Center (Cooper or Cooper Hospital) due to complications arising from a 1977 automobile accident that left him paralyzed from the waist down. By the time of his 2016 hospitalization, Mecouch had become enrolled in Medicare.1 We must determine who bears the primary responsibility for the payment of the medical bills arising from his hospital treatment and care -- Selective Insurance Company of America (Selective), which issued the no-fault automobile insurance policy that provided Mecouch with unlimited personal-injury-protection (PIP) benefits, or Medicare. The parties agree that Mecouch has no responsibility to pay those bills.

Whether Selective or Medicare has primary responsibility for the payment of Mecouch's hospital bills turns on the interpretation of two statutory schemes: the New Jersey Automobile Reparation Reform Act (the No Fault Act), N.J.S.A. 39:6A-1 to -18 (1977); and Title XVIII of the Social Security Act (Medicare), 42 U.S.C. §§ 1395 to 1395lll .

In 1977, the No Fault Act mandated that every automobile insurance policy contain a provision requiring the insurer to pay "all reasonable medical expenses" -- PIP benefits -- to the insured and insured's family in the event they were injured in an automobile accident, regardless of who was at fault in causing the accident. N.J.S.A. 39:6A-4(a) (1977). The Act imposed on the automobile insurance carrier the responsibility of paying PIP benefits "as loss accrues," but provided that medical expenses payable from collateral sources, such as workers’ compensation insurance and Medicare, were to be deducted from the PIP benefits. N.J.S.A. 39:6A-6 (1977) (the collateral source rule). Under the collateral source rule, the automobile carrier typically was expected to make prompt PIP payments first, but ultimately the collateral source had primary responsibility for the payment of the medical bills. N.J. Mfrs. Ins. Co. v. Hardy, 178 N.J. 327, 339, 840 A.2d 231 (2004).

In 1972, Congress expanded Medicare to provide healthcare benefits not only to the aged, but also to persons of any age who suffer from severe disabilities. Social Security Amendments of 1972, Pub. L. No. 92-603, § 201(a)(2), 86 Stat. 1329, 1371. At that time, Medicare was authorized to provide coverage for payment of an enrollee's medical expenses -- except for those expenses covered by workers’ compensation insurance. See 42 U.S.C. § 1395y(b) (1976) ; Fanning v. United States, 346 F.3d 386, 388 (3d Cir. 2003).

In 1980, Congress passed the Medicare Secondary Payer Act to expand the field of collateral sources bearing primary responsibility for the payment of medical expenses of a Medicare enrollee. See 42 U.S.C. § 1395y(b) (1976 & Supp. IV 1980).2 The Secondary Payer Act prohibited Medicare from paying an enrollee's medical expenses if an automobile insurance carrier could reasonably be expected to cover those costs. Ibid. The Act, however, operates prospectively. The Department of Health and Human Services (DHHS) interpreted the Secondary Payer Act to apply only to automobile accidents occurring on or after December 5, 1980. See 42 C.F.R. § 411.50 ; Colonial Penn Ins. Co. v. Heckler, 721 F.2d 431, 440 (3d Cir. 1983). Given DHHS's interpretation of the Act, Medicare was responsible for paying such medical expenses as Mecouch's 2016 hospitalization, which related to injuries he suffered in his 1977 automobile accident.

Relying on its interpretation of the No Fault Act, Cooper filed an action in Superior Court to compel Selective to pay the entirety of Mecouch's 2016 medical bills in the amount of $853,663, including interest. Selective replied that, pursuant to the No Fault Act's collateral source rule, Cooper, as a participating Medicare provider, was required to accept reimbursement solely from Medicare. The Medicare fee schedule limited payment to Cooper in the amount of $84,339.94; Selective eventually conceded its responsibility to pay $12,236 in Medicare co-payments and deductibles that Mecouch owed to Cooper.

Ultimately, the trial court granted judgment in favor of Cooper, ordering Selective to pay Cooper $769,323.06 (the full hospital bill minus the $84,339.94 Medicare was willing to pay). The court construed N.J.S.A. 39:6A-6 as placing on the automobile insurance carrier the primary obligation to pay medical expenses when billed, regardless of available collateral sources such as Medicare.

The Appellate Division reversed, finding that for automobile-accident injuries that occurred in 1977, under the No Fault Act and federal law, Medicare had primary responsibility. According to the Appellate Division, Cooper was required to bill Medicare -- the collateral source under N.J.S.A. 39:6A-6 -- not Selective, for Mecouch's 2016 medical expenses; however, Cooper could bill Selective for the Medicare co-payments and deductibles owed by Mecouch.

We substantially agree with the Appellate Division. As of 1977, two of the paramount goals of the No Fault Act were to provide prompt payment of medical expenses arising from an automobile accident, regardless of fault, and to contain the rising cost of automobile insurance premiums. See Caviglia v. Royal Tours of Am., 178 N.J. 460, 467, 842 A.2d 125 (2004) (citing Gambino v. Royal Globe Ins. Cos., 86 N.J. 100, 105-06, 429 A.2d 1039 (1981) ). The Legislature understood that the affordability of insurance premiums depended on stabilizing the costs borne by automobile insurance carriers. See Haines v. Taft, 237 N.J. 271, 284-85, 204 A.3d 263 (2019). To achieve that objective, the Legislature, in passing the No Fault Act in 1972, placed restrictions on the right of accident victims to sue for noneconomic injuries, Caviglia, 178 N.J. at 466-67, 842 A.2d 125 (citing Sotomayor v. Vasquez, 109 N.J. 258, 261-62, 536 A.2d 746 (1988) ), and shifted the primary responsibility for payment of medical expenses from automobile insurance carriers to certain collateral sources, such as workers’ compensation insurance and Medicare, see N.J.S.A. 39:6A-6 (1977). Under the No Fault Act's collateral source rule, Medicare had primary responsibility and the PIP carrier secondary responsibility for paying medical bills arising from automobile accidents.3 See ibid.

At the same time, in 1977, for those enrolled in Medicare, federal law authorized Medicare to pay for an enrollee's medical expenses, including expenses arising from automobile accidents, with one notable exception: expenses covered by workers’ compensation. See 42 U.S.C. §§ 1395d(a), 1395y(b) (1977). Thus, the No Fault Act's shifting of medical costs from the automobile insurance carrier to Medicare, pursuant to the collateral source rule, N.J.S.A. 39:6A-6 (1977), furthered the objective of both state and federal law at the time of Mecouch's accident in 1977.

For that reason, because Mecouch was a Medicare enrollee in 2016, Cooper -- a Medicare provider -- was required to bill and accept payment from Medicare, which promptly covered Mecouch's medical expenses in accordance with its fee schedule. Cooper could not seek payment from Selective other than for reimbursement of the Medicare co-payments and deductibles.

As explained in more detail in this opinion, we therefore affirm the judgment of the Appellate Division.


The facts are largely undisputed and based on the summary judgment record developed before the trial court.

In July 1977, Dale Mecouch, then twenty-three years old, was seriously injured in an automobile accident in California that rendered him a paraplegic in need of life-long medical care. At the time, Mecouch was a New Jersey resident stationed in San Diego as a member of the Marine Corps. Mecouch's driver's license listed his residence as his parents’ home in Pitman, New Jersey.

In a declaratory judgment action brought by Mecouch, the Superior Court, Chancery Division, determined that Mecouch was covered by his father's automobile insurance policy issued by Selective. Accordingly, the court ordered Selective to provide Mecouch with PIP benefits for all medical expenses arising from the 1977 automobile accident, as required by N.J.S.A. 39:6A-4 (1977).4

Sometime after 1979 but before 2016, Mecouch was enrolled in Medicare. Selective continued to pay Mecouch's medical expenses related to the 1977 automobile accident until December 11, 2015, when it notified Mecouch by letter that, going forward, "Medicare is the appropriate primary payer for any treatment related to" the 1977 accident.

From February 15 to May 17, 2016, Mecouch was admitted to Cooper Hospital for the treatment of medical complications related to the 1977 accident. Cooper forwarded to Selective a bill in the amount of $853,663 for medical services rendered to Mecouch.

Instead of paying that bill, Selective directed Cooper to seek reimbursement from Medicare....

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